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Floating Exchange Rates (floating + exchange_rate)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting66%
Humanities and Social Sciences33%

Selected Abstracts

A Proposed Monetary Regime for Small Commodity Exporters: Peg the Export Price (,PEP')

INTERNATIONAL FINANCE, Issue 1 2003
Jeffrey Frankel
On the one hand, the big selling points of floating exchange rates , monetary independence and accommodation of terms of trade shocks , have not lived up to their promise. On the other hand, proposals for credible institutional monetary commitments to nominal anchors have each run aground on their own peculiar shoals. Rigid pegs to the dollar are dangerous when the dollar appreciates. Money targeting does not work when there is a velocity shock. CPI targeting is not viable when there is a large import price shock. And the gold standard fails when there are large fluctuations in the world gold market. This paper advances a new proposal called PEP: peg the export price. Most applicable for countries that are specialized in the production of a particular mineral or agricultural product, the proposal calls on them to commit to fix the price of that commodity in terms of domestic currency. A series of simulations shows how such a proposal would have worked for oil producers over the period 1970,2000. The paths of real oil prices, exports, and debt are simulated under alternative regimes. An illustrative finding is that countries that suffered a declining world market in oil or other export commodities in the late 1990s would under the PEP proposal have automatically experienced a depreciation and a boost to exports when it was most needed. The argument for PEP is that it simultaneously delivers automatic accommodation to terms of trade shocks, as floating exchange rates are supposed to do, while retaining the credibility-enhancing advantages of a nominal anchor, as dollar pegs are supposed to do. [source]

The revived Bretton Woods system

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 4 2004
Michael P. Dooley
Abstract The economic emergence of a fixed exchange rate periphery in Asia has re-established the United States as the centre country in the Bretton Woods international monetary system. We argue that the normal evolution of the international monetary system involves the emergence of a periphery for which the development strategy is export-led growth supported by undervalued exchange rates, capital controls and official capital outflows in the form of accumulation of reserve asset claims on the centre country. The success of this strategy in fostering economic growth allows the periphery to graduate to the centre. Financial liberalization, in turn, requires floating exchange rates among the centre countries. But there is a line of countries waiting to follow the Europe of the 1950s/60s and Asia today, sufficient to keep the system intact for the foreseeable future. Copyright © 2004 John Wiley & Sons, Ltd. [source]

The stabilization properties of fixed and floating exchange rate regimes

INTERNATIONAL JOURNAL OF FINANCE & ECONOMICS, Issue 2 2004
Keith Pilbeam
Abstract This paper investigates the price and output stabilization properties of fixed and floating exchange rates using a small open economy model. The performance of the two regimes is compared in the face of money demand, aggregate demand and aggregate supply shocks. It is shown that the ranking of the two regimes is extremely sensitive to the weighting of the objective function as between price and output stability, the type of shock impinging upon the economy, the values of structural parameters of the economy and institutional features such as the degree of wage indexation within the economy. The results obtained suggest that estimates of the income elasticity of money demand, the elasticity of aggregate demand to changes in both the real exchange rate and the real interest rate, and the degree of openness of the economy are likely to be important to policymakers when making the choice of exchange rate regime. Neither regime can be said to be dominant in all circumstances. Copyright © 2004 John Wiley & Sons, Ltd. [source]

Latin America and the Dollar Bloc in the Twenty-first Century: To Dollarize or Not?

LATIN AMERICAN POLITICS AND SOCIETY, Issue 4 2001
Kenneth P. Jameson
ABSTRACT The choice of exchange rate regime is a continuing challenge to Latin American policymakers, who currently face pressure to dollarize their economies. The constraints imposed by the "dollar bloc," the informal but powerful currency bloc that ties Latin America to the dominant currency, are central to that choice. Current weak economic performance has called the bloc's norms and principles into question and has made the exchange rate an open issue. Ecuador's full official dollarization is one possible strategy for countries with political stability but poor economic performance to gain access to needed dollar resources. Most of Latin America, however, will continue with variants of managed floating exchange rates, and the periodic foreign exchange crises will provide access to official dollar resources and facilitate renegotiation of the terms of outstanding debt. [source]

Money Games: Currencies and Power in the Contemporary World Economy

ANTIPODE, Issue 2010
John Agnew
Abstract:, A well-known cliché has it that "money makes the world go round" Certainly, monetary arrangements, specifically exchange-rate mechanisms, can serve to show the degree to which markets and states intersect to direct the workings of the world economy. It is common to assume that the singular model over recent decades has been a neoliberal one based on independent floating exchange rates. I challenge this assumption by showing that a number of different combinations of money and power have operated in the recent past, creating a number of distinctive "money games". Only one of these, the globalist/transnational, is facing a particularly severe crisis. The others, what I term the classic/territorial, integrative/shared, and imperialist/substitute provide available alternatives. The recent history, geographical features, and future prospects of the various money games are the main concerns of the essay. The analysis welcomes the recent financial crisis as providing an opportunity to further pluralize political-economic visions beyond the perceived dominant one-size-fits-all neoliberal ideology of the globalist regime. [source]

RE-EXAMINING THE EFFECTIVENESS OF STABILISATION POLICY

AUSTRALIAN ECONOMIC PAPERS, Issue 4 2007
ANTHONY J. MAKIN
This paper develops an alternative international macroeconomic model for evaluating the effectiveness of fiscal and monetary policy in stabilising national income under fixed and floating exchange rates. It encompasses national output and income, saving, investment, money and capital flows and linkages between the exchange rate, price levels and real interest rates consistent with international parity conditions. It demonstrates that the nature of government spending is pivotal to the effectiveness of fiscal policy, revealing that, ceteris paribus, higher public consumption expenditure contracts national income and depreciates the exchange rate, whereas higher productive public investment spending has opposite effects. The framework also shows that the effectiveness of fiscal and monetary policy as macroeconomic policy instruments is not ultimately dependent on the exchange rate regime. [source]